Crony Capitalism and Damned Lies

I just had to point out a WSJ Op-Ed/article that is just one more example of how much the media has ceded facts to right wing tropes.  It’s written by Arthur Brooks. It’s called “Fairness and the Occupy Movement”.  Brooks tries to equivocate the rent seeking activities of rich and powerful interests like the war and finance industries and the existence of social safety net programs like food stamps.  It is not difficult for me to understand there is no real connection between providing things to the poor that need programs to stay alive and handing stuff needlessly to rich industries to attain extraordinary profits from market protections, subsidies and out right federal largess.  Why is it so difficult for the press and politicians to grok the difference?

Economists Jeffrey Sachs and Mark Thoma call shenanigans on Brooks’ pretzel logic and self-serving ignorance of facts.  Of course, I’ve come to expect nothing less from the American Enterprise Institute and its researchers who suspend all kinds of data and theories for their highly paid propaganda.  The Wall Street Journal is basically an arm of that enterprise.  The problem is that these lies shape policy debates.

First, Sachs points out this is an absolutely disingenuous narrative.

Where Brooks goes wrong is his description of inequality and fairness. The Republican view, which he espouses, is to reduce taxes, cut government services, and let markets be the standard of fairness. Here Brooks is deceptive in his rendition of the facts.

First, Brooks downplays the extent of inequality that has been built up in thirty years of crony capitalism. He favorably writes that “every income quintile has seen a real increase in purchasing power of at least 18% over the past 30 years,” citing a recent study of the Congressional Budget Office (CBO). Yet the real point of the CBO report, which Brooks does not mention, is that the richest 1% enjoyed a staggering rise of 275%, while the poorest stumbled by with a meager 18% gain. Moreover, the CBO report takes the data only to 2007. By now, even those meager gains at the bottom have been mostly lost.

Second, Brooks fails to note that the situation for the poor will be drastically worse if federal transfer programs are cut as the Republican Party is urging. The poorest quintile depends on these federal programs to stay alive. If the poorest Americans had to survive without government support, their incomes would be slashed to disastrous levels.

The Republicans answer to crony capitalism is to slash government. Yet by this they mean mainly an attack on the remaining social programs. This is a kind of bait-and-switch strategy: rev up the anger against government corruption, and then kill the life-support programs of the poor and working class. Crony capitalism exists mainly in the big-ticket sectors of the economy — banking, oil, real estate, private health insurance, military contractors, and infrastructure — not in the essential but much smaller parts of the economy: malnutrition of poor children, lack of quality pre-school, insufficient job training, and inadequate student loan coverage.

Yes, crony capitalism should be confronted anywhere in the economy, yet cutting the life-support systems for the working class and poor won’t fix government, but instead would cripple the prospects of more than 100 million poor and near-poor Americans. To control crony capitalism, we need to direct our attention where it belongs: the wealth-support systems of the rich, not the life-support systems of the poor.

Sachs points out 5 egregious examples of crony capitalism.  Mark Thoma goes even farther. He discusses how the Democrats have been sucked into the right wing agenda of twisted facts and ground shifting. Your guess is as good as mine as to how this has come about.  I’m sure Dems like Ben Nelson support the agenda and could care less about the untrue narrative that supports wealth transfer and market manipulation for the uberrich.  Others are likely captured because they want the wealth that comes with “serving the public” and they want to get re-elected.  Political office appears to be the fast track to the 1 percent these days.  Others probably think this is sincere negotiation or they get some side benefit to concession so they go along.

The hope for common ground where there is none can lead to Obama like one-sided concessionary behavior, and we have more than enough of that already. Yes, let’s find common ground where it exists, but let’s also be careful not to try to meet in the middle when the other side is pursuing a bait and switch strategy. The Republican goal of reducing the size of government through reductions in social programs is unwavering, and they will pursue any argument handy at the moment to bring this about. In recessions, they tell us tax cuts are needed to stimulate the economy, but the real goal is to cut funding for the government permanently. Once the taxes are reduced, they won’t agree to increase them again (unless it’s to protect their cronies, i.e. an increase in payroll taxes is fine so long as it prevents the increase in taxes on the wealthy needed to fund it). In normal times, we’re told tax cuts stimulate economic growth even though there’s not much evidence to support this claim. Presently, it’s the cronyism argument, and tomorrow it will be something else. The Republicans have their eyes on the ball, and the rules of the game are to be adjusted as necessary to allow them the best opportunity to take the ball across the goal line. Winning is all that matters. Fairness for both sides playing the game, etc. has nothing to do with it and we’d be wise to keep our eyes on the ball as well.

The other thing to note is that the location of common ground has shifted to the right from where it used to be. “Meet us in the middle” now means meeting on ground that would have been considered on the right not all that long ago. Democrats have already conceded too much in the ideological war, and there comes time when leaders in the party must take a stand and hold their ground. That time is long past.

What is clear to me is that there is very little left of what an economist would view as a free,efficient, functional market through out our economy.  Economies of scale, information brokers, concentration of markets into the hands of very few corporations, tax subsidies, federal contracts handed to friends of politicians, advertising, imagined product diversity, insider information, and moral hazard have all dealt blows to efficient pricing, resource allocation, and resultant quantity produced. It’s terribly dishonest of people like Arthur Brooks to equivocate programs that exist to protect the weakest in the society from the predatory behavior of the most rich and powerful who destroy functioning markets to achieve extraordinary profits and market power.

I have no idea why any one takes these fake “think tanks” seriously except they put out propaganda to serve the interests of crony capitalism itself..   The Paul Ryan Budget Scam was an example of crank analysis coming from the Heritage Foundation. Their output plagues policy discussion.  Their stuff wouldn’t be given the light of day in actual empirical or theoretical journals so they have to invent some institute just to look serious.  How these guys can lie with such a straight face is beyond me.  Also beyond me is the number of people that fall for the lies.  But then, some gullible and clueless media outlet or one saying that they’ll print lies just to be perceived as fair or some journalist with an agenda runs with the story.  Then, crank analysis achieves some critical mass of “serious”.  By the time that damned lie gets fact checked, no one is paying attention any more.  It’s no wonder that we are so f’d.